OMCs to cut aviation fuel prices this week

After five price hikes; sequel to decline in crude oil prices.

Aviation companies are set to get a major relief from high aviation turbine fuel (ATF) prices. Following a steep decline in crude oil prices, oil marketing companies (OMCs) are looking to cut ATF prices by 5-6 per cent, or Rs 2,000-2,500 a kl across various cities beginning Thursday, said industry sources.

This cut would come after five price hikes. Between May 1 and July 1, OMCs had raised ATF prices by nearly 22 per cent or Rs 6,943 a kl in Delhi, and by over 22 per cent or Rs 7,259 a kl in Mumbai. Currently, ATF prices for Delhi and Mumbai are Rs 38,557.6 a kl and Rs 39,789 a kl, respectively. Prices of ATF are revised every fortnight.

In mid-June, Jet Airways and Kingfisher Airlines, which control nearly 60 per cent of the market, had increased fuel surcharge by Rs 400 to offset a hike in fuel prices. A trend reversal can now be expected.

The rise in ATF prices, which constitute about 40 per cent of an airline’s operating cost, has been exerting continuous pressure on cash-strapped domestic carriers. The domestic airline industry is estimated to have lost $2 billion in 2008-09 on high ATF prices and low passenger traffic.

As a result of rising losses, most airlines companies have not been able to make timely payments to OMCs for ATF. However, of late, airlines have been rationalising capacity to increase operational efficiency and contain mounting losses.

The Indian basket of crude oil has averaged $63.66 a barrel in the month so far, down 7.89 per cent from the June average of $69.12. On Sunday, the Indian basket stood at $59.81 a barrel. However, the July average is still higher than the current year’s average till date of $60 a barrel, while being significantly lower to the previous fiscal’s average of $83.57 a barrel.